No thanks! Companies reject ‘Shark Tank’ deals, still thrive

In this Sunday, Feb. 22, 2015 photo, Daniel Rensing, left and his wife Stephanie, owners of The Smart Baker, work in their warehouse in Rockledge, Fla. Annual revenue for their company is close to $1 million, up from $130,000 before their March 2012 appearance on the reality TV show “Shark Tank.”(Photo: AP)

NEW YORK – With the cameras rolling, Daniel and Stephanie Rensing accepted an offer from a “Shark Tank” investor. But after they had time to think about it, they changed their minds.

Annual revenue for their company, The Smart Baker, is close to $1 million, up from $130,000 before their March 2012 appearance on the ABC reality TV show.

“Not doing the deal and having that exposure was probably the best scenario for us,” says Daniel Rensing, CEO of the Rockledge, Florida, company which sells aprons, parchment paper and other baking equipment.

Dreams of investor money have induced more than 150,000 businesses to apply to be contestants on “Shark Tank,” where entrepreneurs pitch to cast members including Barbara Corcoran, founder of a prominent New York real estate brokerage; Daymond John, founder of the clothing company FUBU; and Robert Herjavec, founder of the technology conglomerate Herjavec Group.

Entrepreneurs may be all smiles when they get an offer on the show, but the deals aren’t set in stone. Negotiations start soon after episodes are taped. Contestants can walk away if they don’t like the terms.

“When we shake hands on a potential deal on Shark Tank, the romance runs high and everyone’s excited about what could be,” Corcoran says. “In the end, the entrepreneur is in charge.”

During the first five seasons, 374 contestants appeared on TV and investors made 190 offers, according to ABC. Forty-eight contestants turned down offers during taping, executive producer Clay Newbill says. They haven’t tracked how many deals fell apart during negotiations.

The producers ask entrepreneurs and investors to make their best efforts to close deals, Newbill says.

“But we understand, just as in the real world, the reality is that not all deals will close,” he says.

SECOND THOUGHTS

Corcoran offered $75,000 for 40 percent of The Smart Baker, and a 5 percent sales royalty, during the 2011 taping. During negotiations the Rensings, disagreed with Corcoran about the target market.

“We were sticking to our guns on the market we served,” Rensing says.

Corcoran says she was disappointed, but she knows a rejection is an occupational hazard on “Shark Tank.”

“Nobody likes to be turned down, especially me,” she says.

The Smart Baker has thrived without her money. In the following year, revenue grew to $600,000. The episode also helped the company get noticed by Food Network and other media. Reruns provide a sales bump.

But a “Shark Tank” deal isn’t just about money; it also brings expertise and mentoring from a pro. The Rensings don’t dwell on what they might have missed by not sticking with Corcoran.

“There is always the ‘what ifs,’ but we don’t let that get to us,” Daniel Rensing says.

THE RIGHT MOVE?

Some contestants may turn down offers because they feel there are more important things than getting investors, says Matthew Rutherford, an entrepreneurship professor at Oklahoma State University who has studied “Shark Tank” pitches.

“What they crave over everything including money and wealth is autonomy,” Rutherford says.

Entrepreneurs who appear on the show are likely hoping for both a cash infusion and control of their companies, says Harvard Business School professor Noam Wasserman. But the money doesn’t guarantee success, and having an investor may be an unpleasant experience.

“You could end up with the worst of both worlds,” he says.

NOT AFRAID TO SAY NO

When Mona Weiss and Scott Shields pitched their company, Eco Nuts, on an episode that aired in October 2012, Herjavec offered $175,000 for 50 percent. Weiss and Shields, who wanted to sell a 15 percent stake for that amount, said no on the spot.

“It was a terrible deal, really awful. No one would give up half their company for less than they make in a year,” Weiss says. The Lawndale, California, company, which makes laundry detergent from berries, was on track for $250,000 in revenue in 2012.

A spokeswoman for Herjavec, Erin McLean, says he does not comment on deals or offers that are closed.

Some people told Weiss and Shields they were foolish.

“They said, ‘it was a lot of money, you should have taken that,’” Weiss says.

But being on “Shark Tank” put Eco Nuts on a faster track to its current success. Revenue, now over $1 million, grew so much the company moved to manufacturing space five times bigger than its original factory.